When was the last time you took a good look at your numbers? Take this quiz designed to shed some light on the numbers that underlie your bottom line and why you should care about them.

1. What’s the cost-per-service for products used in you enhancement services?

a. What does cost-per-service mean?

b. I’m sure it’s low.

c. I’m on top of the cost-per-use for each product we use.

2. What’s your staff retention rate?

a. We have a turnstile at the front door. Are you looking for a job?

b. People rarely leave — maybe a couple a year?

c. Our staff turnover is about 10% per year (1 out of 10 techs).

3. What’s the average service ticket amount excluding retail and tips?

a. I don’t track the numbers that closely.

b. Ask my accountant.

c. [insert specific amount] average per client visit.

4. What’s the percentage of clients who prebook appointments before they leave the salon?

a. They’ll call me later.

b. I’ll prebook them if they ask, sure.

c. I remind each client to prebook before leaving — if they’re not one of the 50% that have standing appointments.

5. What’s the gross income-per-square-foot of the salon?

a. Hey, how big would you guess this salon is?

b. You’re joking right; people really know that stuff?

c. We have 1,000 square feet and took in $200,000 last year. That’s $200 per-square-foot per year or  $16.67 per month. [insert your own specifics]

6. What’s the average retail sales amount per ticket?

a. I sold a bottle of polish today.

b. Not enough, I have to dust the leftovers.

c. Our ratio is about 70/30 [insert your own numbers], services to retail sales.

7. What’s your client retention rate?

a. What if they leave and then come back, does that count?

b. Who needs them if they don’t see how great we are?

c. 95% come back to the salon; 85% stay with the same technician. [Your stats may vary, but hey, you know them!]

8. Can you rattle off your fixed and flexible expenses? And the total per month?

a. Anything I spend is an expense, right?

b. They change so much; I just add them up at the end of the year.

c. Yes, I track them closely so I can make sure I’m making a profit and adjust accordingly.

9. How much time do you spend recruiting throughout the year?

a. If I need someone, I put a sign in the window.

b. I don’t actively recruit, but collect applications if someone comes in to ask if we’re hiring.

c. I give a talk once a month at the local school and keep my eye on local talent before I need them. Staying in touch with local talent and constantly taking applications lets me always have a full salon.

10. How much time do you devote to training and staff development per year?

a. They should have paid attention in nail school.

b. I don’t track their training but the staff members usually go to a tradeshow every year.

c. We have some sort of hour-long training event every month during a staff meeting. We also attend tradeshows, read industry magazines, and host manufacturer trainings regularly.

I bet you were expecting a nifty answer key right about now. The truth is, your business is a little more personal — and complicated — than that. If you scored mostly Cs, then you are on your way. I’ll let you in on a little secret. The best salons are always adapting … and sweating the small stuff. This quiz is an exercise in self-discovery. The statistics that apply to your salon will be different from those for a salon down the street. The important thing is that you know what they are and can use them to drive your decisions in a healthy manner. A healthy business model is based on facts. Were there a few questions that left you stymied? It’s OK. Everyone has to start somewhere. You are here. Read on to learn how to use these metrics to improve your salon’s bottom line. [PAGEBREAK]

Don’t Just Know the Stats —Make Them Work for You

If you are like most salon owners, the recent changes in the economy have had you taking a closer look at your bottom line and thinking, “What can I cut out?” In reality, you may be getting ahead of yourself. Before you make any changes in the salon, get to know the numbers you already have. The question shouldn’t be, “Can the salon afford it?” but rather, “Is it a good business decision?” Whether it’s you flying solo at a booth or you and 25 employees, it boils down to profit. A salon can’t exist for long without moving into the black. We all track income, but what about these more elusive stats? It’s time to face the numbers and continue to build a solid business model.

Cost-Per-Service

Expenses form the backbone for pricing. Figuring your cost-per-service may be as easy as reading the manufacturer’s literature. To fi nd the total cost for a service, list all of the products used and then add up the individual costs to get a total. To figure it out on your own, you will need to track the usage over time to see how many applications you can get from a certain size package. Jaime Schrabeck, owner of Precision Nails in Carmel, Calif., looks for “cost-effective products.” She keeps her product costs to “less than 5% of the service fee.”

How to make it work for you: Buy products in bulk or when they are on sale to get the greatest impact. Also, keep a close eye on product use. Pre-measuring products such as those used in pedicures is not only hygienic, it’s also a way to regulate waste.

Staff Retention

An empty station translates into lost service and retail dollars for the salon. Tracking staff retention will allow you to plan for the inevitable need to hire and train assistants, receptionists, and nail technicians. For an easy way to determine the rate, look over the last few years and count how many people you have hired each year. It doesn’t matter if they left to move or if they stormed out the door. This isn’t about anything but numbers. So if you normally keep a staff of 10 and two people have to be hired to replace those leaving, your retention rate is 80% a year.

How to make it work for you: Having a stable number of staff members allows the salon to book appointments reliably. Retaining staff allows the salon to concentrate training dollars on expanding the offerings and improving the level of service.

Average Service Ticket

Your average service ticket is the average amount each client spends on services in your salon on a single visit. This can be further broken down to separate services and retail. Tracking services and comparing them to costs will help you establish if those services are profitable. “It’s more important than ever to know where your service dollars come from,” says Reneé Borowy, owner of VIP Salon & Spa, in Riverview, Mich. By using computer software, salons can easily track who their best clients are and who services them. Borowy uses this information to formulate specials and track their effectiveness. Your average service ticket shows how loyal clients are to the salon and how many service recommendations they accept.

How to make it work for you: Help nail technicians in the salon to set goals by sharing this information with them. Sit down with them and help create a plan to increase average service tickets by 5% over the period of 90 days. It might be as simple as having them suggest upgrades to services or recommending that a client try a new service.

Pre-booking Rate

“So many techs just wait for the phone to ring to build their business. They don’t have a handle on breaking down the numbers to simplify how much they need to grow.” Vicki Peters, president of Vicki Peters Nail Products in Henderson, Nev., shares that the biggest difference in salons that track the numbers (and break them down) and those that don’t is profit. “They understand what it takes to make a profit.” Profitable salons keep the client chairs full. Pre-booking is a way to ensure that there is future income for the salon. Tracking how many clients pre-book directly relates to keeping clients.

How to make it work for you: Run a contest in the salon to see who can get the highest pre-booking rate for the month. It may be a matter of asking, “May I go ahead and book your next appointment?” Schrabeck encourages pre-booking and has an invitation-only standing appointment policy. She offers standing appointments to her best and most reliable clients. This approach reduces the chance of no-shows and makes a standing appointment a benefit that clients desire.[PAGEBREAK]

Gross Income Per Square Foot

This is a simple formula. You take your annual gross income and divide it by your square footage. Some salons break it down even further and track the gross income of each treatment room or area. The idea is to examine the relationship between income and space.

How to make it work for you: Now that you know how much income the space generates, you can look at ways to reapportion it or increase the effectiveness. Is there too much seating in the reception area? Is there room for retail displays in treatment areas? How many additional technicians could comfortably work in the space? Do you need a bigger (or smaller) space? If you generate little or no business from walk-ins, do you really need premium shopping center space? You get the idea. The more you sort the numbers the more you will be able to use them to boost your bottom line.

Retail Sales

Whether you track retail sales as a percentage of services or per service ticket, it’s up to you. With computer software, you can choose a myriad of options. Retail sales carry a big bang. They don’t take up much space, don’t require much employee time (compared to services), and they are consumable. Because clients buy them repeatedly, products such as nail polish and lotions become a second stream of income. Tracking retail sales also lets you know which technicians encourage shopping. Along with average service tickets, retail sales let you know who the top earners are in the salon.

How to make it work for you: Borowy hosts contests among the staff members. Techs compete to see who can increase sales by the greatest percentage. Offering clients an assortment of shopping options ranging from nail polish to novelty handbags may be the key to fattening sales. Keeping displays full, dust-free, and rotating frequently will help increase interest. The clients will be looking to see what’s new each time they arrive for a service. 

Client Retention

At VIP Salon & Spa, booking procedures are based not only on seniority but on client retention as well. Every three months, the booking order is reevaluated.

How to make it work for you: Keeping clients with a particular tech is important, but it’s even more important to keep them in the salon. Help technicians develop the skills to suggest another tech if they feel the client might leave the salon. Work some role-playing into your next staff meeting. By creating a mutually supportive environment, clients can be retained by the salon — which helps all the employees.    

Fixed vs. Flexible Expenses

Fixed expenses are those that you have to pay every month whether you service any clients or not. They would be things such as rent, insurance, advertising contracts, etc. Flexible expenses are those that change proportionately as your client load increases, such as payroll, products, and water. It’s important to know the difference. Chances are good that you take all of this information to your accountant for reporting purposes. Does your accountant ever sit down and help you determine if your current business model is working, or how to improve it? If so, great, hang onto that accountant. For the rest of us, we have to tweak our own plan. Roughly, gross income minus expenses equals profit.

How to make it work for you: Schrabeck prices services based on a formula that includes time and product costs that is designed to keep her salon profitable. Her salon uses a metric of at least $1 a minute in the formula. Even more impressive is that Precision Nails succeeds in doing it with only two treatment areas. The key here is to use your own stats to set prices. If you base your prices on what the salon down the street charges, you are taking for granted that they have a functional business plan. That’s a lot of faith to put into someone you don’t even know. It’s understandable that salon owners are concerned about what price the market can bear, but it won’t matter if they are out of business from flawed pricing. Remember, profit is the goal. From time to time, price increases are necessary.

Recruiting and Training

“Tracking training and ongoing education is important because the more knowledge you have, the more you can charge,” says Peters, a veteran nail tech and educator. When salons invest in employees it can reduce the amount of money they spend overall to train new hires. It’s a cycle. Ongoing recruiting and training go hand in hand. Recruit even when you aren’t hiring; train even when you don’t know how long they’ll stay.

How to make it work for you: Put it down on paper. Commit to a date once a month. Go to your local nail school and volunteer to give a talk or mentor enrollees. This isn’t about screening them upfront. Just put yourself front and center and get to know them. Make sure they have your business card and an invitation to call you. You never know when you will have a vacancy or they will be looking for a job. Schedule staff trainings regularly. Put them on the calendar in big, bold letters. Be known as the salon that never stops learning.

You’ve probably heard at least one person say, “Statistics lie.” Statistics don’t lie; they paint a picture as vivid as we will allow. Crunching the numbers can be liberating. Patterns start to develop. There is no magic. Your business model may not look like the salon down the street. But it’s okay. The idea is to use your unique statistics to work harder for you.

 

 

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